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IGL: SWOT Analysis-I

Nov 6, 2007

Over the next few articles we shall make a SWOT analysis of Indraprastha Gas Limited (IGL). We begin with its strengths.
StrengthsSuperior product in terms of emissions and pricing vis-ŗ-vis petrol and diesel: Natural Gas, with low emissions, is an environment friendly fuel due to which IGLís business has an inherent strength. There is a lack of visible alternative products in commercial terms. Liquefied petroleum gas (LPG) is yet to emerge as commercially viable alternative fuel for the transport sector. Natural Gas is considered to be a vital link in the energy chain and there is a global trend of increasing use of natural gas as an alternative fuel.

Dominant market position and first mover advantage: Indraprastha Gas has the first mover advantage in production and marketing of compressed natural gas (CNG) and piped natural gas (PNG) in the key market of NCT of Delhi. It has been able to utilise the growth impetus provided by the Supreme Court directive, with its technical expertise and project implementation capabilities. It has been able to rollout its CNG distribution network by installing key project and marketing infrastructure such as pipeline network, compressor stations and a marketing network within a span of 53 months. It has also been able to cover several pockets of Delhi by rolling-out the PNG network that is being further expanded in a phased manner in other areas of Delhi on the basis of estimated demand potential. Due to this progress, its project implementation related risks are minimized.

There are significant entry barriers for new entrants because of the capital-intensive nature of its business, gas allocation and approvals required to roll out the network. There are no visible challenges to its dominant market position in foreseeable future, although both RIL and RNRL are eyeing the market.

Capability to tap significant opportunities for growth: IGL is strategically positioned to capture benefits of growing demand for CNG in Delhi that comes from the public transportation sector as well as from domestic and commercial users in the PNG business in Delhi. After the CNG led growth in FY02 and FY03, the company expects to benefit from the PNG segment in the years ahead.

Growth in PNG users

†

FY01

FY02

FY03

FY04

FY05

FY06

Domestic

2821

4111

7719

15245

25103

46727

growth rate

†

46%

88%

97%

65%

86%

Small commercial

15

37

72

100

140

215

growth rate

†

147%

95%

39%

40%

54%

Large commercial

5

5

11

18

34

47

growth rate

†

0%

120%

64%

89%

38%

Total

2841

4153

7802

15363

25277

46989

growth rate

†

46%

88%

97%

65%

86%

Moreover, the adjoining areas to NCT of Delhi, such as NOIDA, Gurgaon and Faridabad provide significant additional opportunities for expansion in both the CNG and the PNG segments.

Experienced sector leaders as promoters
GAIL and BPCL who have experience relevant for the city gas distribution business are promoters of IGL. The company derives technical and managerial strength from its promoters who have actively supported it during implementation phase and continue to support the company in its operations. The promoters have deputed key personnel from their cadres to the company. Leading financial investors demonstrating success of public-private partnership have also supported IGL.

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